First-tier lenders are banks such as ANZ, BNZ, Westpac, HSBC, Kiwibank, ASB, and so-on. For the most part, loans from these banks are very similar, although their mortgage pricing and terms do fluctuate. Typically, these banks will closely align their interest rates with the rate set by the Reserve Bank of New Zealand.
Non-bank lenders are often called second-tier lenders. They include lenders who are in the business providing finance but aren’t the traditional registered banks like those included above. Non-bank lenders include building societies and credit unions. Especially for property investors, second-tier lenders can offer loans to help buyers secure a mortgage with a lower deposit. The main difference between first and second tier lenders is the acceptable deposit for a property loan. Banks typically expect a 40% deposit for an investment property, while non-bank lenders can require as low as a 10% deposit. This can dramatically change matters for a property investor.
The non-bank, second-tier lenders also have more flexibility when encountering situations such as the self-employed or even those with an adverse credit history. This makes the property market much more accessible to investment.